Gold and Silver Cut Losses, But Market Remains "Wobbling"
Precious metals are beginning to recover after being rocked by another sell-off in the Asian session on Monday (February 2nd), as the market digests the sudden brakes on a previously over-speeding rally. After a sharp drop, gold and silver are now moving more like a foothold—rather than a smooth rebound.
Updated spot prices: gold is around $4,720.19/ounce (down more than 3%), while silver is around $81.41/ounce (down more than 3.8%). Both fell further in early trading, before buying at the bottom and short positions were covered.
The root of the problem remains the same: the record-breaking gold and silver rally throughout January has finally "tired." Many market participants entered due to a mix of geopolitical issues, concerns about currency weakness, and even the issue of the Federal Reserve's independence—and then, when sentiment changed, overly tight positions were quickly unwound.
The most significant trigger for the reversal came after Donald Trump nominated Kevin Warsh as his candidate for Fed Chair. The market perceived Warsh as being more assertive on inflation, which strengthened expectations of "higher for longer" interest rates, boosted the dollar, and pressured dollar-denominated precious metals.
Pressure was exacerbated by mechanical factors: explosive volatility thinned liquidity, and rising margins and leveraged positions accelerated the selling wave. When the market reversed, dealers and traders who had been "price-chasing" were forced to close their exposures—resulting in more extreme movements than usual.
From here, one key factor lies in buying behavior from China. If "buy on dips" interest remains strong—especially ahead of the shopping season—prices could be cushioned. However, if the speculative flows previously rife in domestic markets like Shanghai escalate, pressure could persist, even with occasional rebounds.
Source: Newsmaker.id
